About the Machine Hour Rate Calculator
This machine hour rate calculator converts everything it costs to own and run a machine into a single cost per running hour — the figure you need to price jobs, compare quotes, decide whether to outsource, or set a shop rate. It splits the rate into fixed costs that accrue whether or not the machine runs (depreciation, interest on the money tied up, insurance and property tax, floor space) and variable costs that only occur while it runs (power and maintenance), then adds the operator.
It is built for machine shops, fabricators, print shops, plastics and woodworking plants, cost accountants and engineers building a quote. Use the machine-only rate when the operator is costed separately or runs several machines, and the total rate when one operator is dedicated to the machine.
Depreciation is straight-line over the useful life, and interest is charged on the average investment ((cost + salvage) ÷ 2), the usual simplification in equipment costing. The biggest lever is annual operating hours: fixed costs are spread over the hours the machine actually runs, so a machine running one shift has a much higher hourly rate than the same machine running three.
With the default inputs, the machine hour rate (with operator) is $45.37. Change any value above to recalculate instantly.
How to use the machine hour rate calculator
- 1Enter the installed cost, expected salvage value and useful life.
- 2Enter realistic running hours per year — not clock hours.
- 3Add interest, insurance and tax, maintenance and the floor space it uses.
- 4Enter rated power, average load and your electricity price, plus any per-hour tooling.
- 5Add the operator’s hourly cost, or set it to 0 for a machine-only rate.
Formula and method
Fixed annual costs are straight-line depreciation (cost minus salvage, divided by useful life), interest on the average investment ((cost + salvage) ÷ 2 × interest rate), insurance and property tax as a percentage of cost, and the facility cost of the floor area the machine occupies. Maintenance is entered as a yearly amount. Together they are divided by the machine’s running hours per year.
Power cost per hour is rated power × average load factor × electricity price, because most machines draw well below their nameplate rating on average. Tooling and consumables are added per hour, giving the machine-only rate; adding the operator’s fully burdened hourly cost gives the total machine hour rate used to cost a job.
- C
- Installed machine cost
- S
- Salvage value
- L
- Useful life (years)
- i
- Interest rate / cost of capital
- t
- Insurance and property tax rate
- A × f
- Floor area × facility cost per area per year
- M
- Annual maintenance and repairs
- H
- Running hours per year
- LF
- Average load factor
- e
- Electricity price per kWh
Worked examples
$250,000 CNC machining center on two shifts
Depreciation is $225,000 ÷ 10 = $22,500 a year, interest on the $137,500 average investment is $8,250, insurance and tax $3,750, and floor space 300 × $12 = $3,600. Over 4,000 hours that is $9.53 per hour fixed. Power (22 kW × 70% × $0.12) is $1.85 and maintenance $2.00, for a machine-only rate of $13.37; with a $32 operator the rate is $45.37 per hour.
Same machine on a single shift
Fixed costs of $38,100 a year spread over only 1,800 hours are $21.17 per hour, and maintenance rises to $4.44 per hour. With $1.85 of power the machine-only rate more than doubles to $27.46, showing why utilization matters so much.
Small press brake, machine-only rate
Depreciation is $54,000 ÷ 12 = $4,500 a year, interest on the $33,000 average investment $2,310, insurance $600 and space $1,500 — $8,910 of fixed cost, or $4.46 per hour over 2,000 hours. Maintenance adds $1.25 and power 11 kW × 50% × $0.14 = $0.77, for a machine-only rate of $6.48 per hour with the operator costed separately.
Frequently asked questions
What is a machine hour rate?+
It is the total cost of owning and operating a machine divided by the hours it runs, expressed as a cost per hour. Cost accountants use it to absorb machine-related overhead into products, and shops use it to price jobs by multiplying it by the machine time each job needs.
What costs go into a machine hour rate?+
Typical items are depreciation, interest on the capital invested, insurance and property tax, floor space and building costs, power, maintenance and repairs, tooling and consumables, and — if the operator is dedicated to the machine — the operator’s wages and benefits.
How many hours a year should I use?+
Use the hours the machine actually runs, not the hours the shop is open. A single 8-hour shift on about 250 days is 2,000 hours before setups, breakdowns, maintenance and idle time are taken out; two shifts roughly double that. Use your own machine logs or MES data for the real figure. Overstating hours understates the rate.
Should the operator be included in the machine rate?+
Include the operator when one person runs one machine full time. When an operator tends several machines, or labor is costed separately on the job, use the machine-only rate and add labor separately so it is not double counted.
Is a machine hour rate the same as a shop rate?+
Not quite. A machine hour rate is cost. A shop rate is what you charge customers, which adds a share of general overhead (office, sales, management) and a profit margin on top of the machine and labor cost.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.